US Dollar, DXY Index, USD, Fed, GDP, China PMI, USD/JPY, Euro CPI – Talking Points
- US dollar weakens on weak data, giving hope to equity bulls
- China sees good PMI data, but property sector continues to slide
- It appears that the markets are data-centric right now. Will Weak Data Push USD Down?
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The US dollar steadied the ship on Thursday following disappointing overnight data that could signal tough conditions ahead for the US economy.
Annual GDP for the second quarter was cut from 2.4% to 2.1% and the ADP employment report missed estimates. It showed that 177k jobs were added in August instead of the estimated 195k.
In a classic case of bad news being good news, this has led to speculation that the Federal Reserve may not need to be as aggressive in its monetary policy settings as previously thought.
Stock markets seem to be liking the trend, with Wall Street recovering from early losses in the cash session to end the day with modest gains. Nasdaq was the best performer with a gain of 0.54%. The futures are pointing to a quiet start to the upcoming cash session.
APAC stock markets had a mixed day, with Australian and Japanese indices trading slightly in the green, while those in mainland China and Hong Kong were in the red.
Country Garden, one of China’s biggest property players, revealed further problems after reporting a record loss of US$7 billion in the first half of this year and indicating it could default on loans.
The official Chinese manufacturing PMI for August printed at 49.7, beating an estimate of 49.2, but it was not enough to allay concerns around the assets sector.
Month-on-month Japanese industrial production data for the end of July came in at -2.0% instead of the expected -1.4%. USD/JPY then fell to 146.75 and then recovered above 146.
Crude oil has retained recent gains and WTI futures contract is above USD 81.50 bbl while Brent contract is near USD 86 bbl. Similarly, spot gold remained trading above $1,940 USD.
Looking ahead, Euro-wide CPI data will be released ahead of US jobless claims.
The full economic calendar can be viewed here.
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DXY (USD) Index Technical Analysis
The DXY (USD) index ended flat today after 3 days of losses and broke below the ascending trend line.
Support could lie at 102.58, which is the 38.2% Fibonacci retracement level of the move from 99.58 to 104.45. A 50% retracement of the same move could also provide support near 102.00.
Between those levels, the 55- and 100-day simple moving averages (SMA) may provide support, currently in the 102.35 – 102.50 area.
On the upside, the nearest resistance could be at the 10-day SMA which is near the historical breakpoint of 103.57. Up ahead, the previous peaks at 104.45 and 104.70 could provide resistance.
Chart created in TradingView
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—Written by Daniel McCarthy, Strategist for DailyFX.com
please contact daniel @DanMcCarthyFX on Twitter
Source: www.dailyfx.com
